Description

The Insolvency Law Reform Act 2016 (Cth) is the most comprehensive reform of bankruptcy and corporate insolvency laws in more than twenty years. It inserted into the Corporations Act a new s 600K which incorporates the Insolvency Practice Schedule (Corporations) which sets out the main provisions relating to companies under voluntary administration; subject to a deed of company arrangement; in liquidation or provisional liquidation.

The most significant features of the Insolvency Practice Schedule (Corporations) are:

removal of the distinction between official and registered liquidators;

significant changes to rules dealing with remuneration of external administrators; including introduction of a statutory maximum default remuneration for corporate insolvencies involving companies with few or no assets, removing the need to convene creditors’ meetings and conferring a power on creditors, ASIC and the court to appoint a cost assessor to review and report on the reasonableness of the remuneration and costs incurred in the administration;

enhanced creditor rights that enable creditors to remove a registered liquidator and appoint a replacement by ordinary resolution subject to the liquidator’s right to apply to the court to prevent removal. Creditors also have the right to make reasonable requests for information and records which the liquidator is obliged to meet unless there are insufficient funds; enabling liquidators to assign certain rights of action to third parties such as in relation to voidable transaction claims and insolvent trading; and

increased powers to ASIC to monitor and audit the conduct of external administrations including powers to issue written directions to comply with Corporations Act requirements, to direct a liquidator not to accept any further appointments and to suspend or cancel a liquidator’s registration.

This legislation is discussed in Chapters 22 to 25.

Corporations Amendment (Crowd-sourced Funding) Act 2017 (Cth) established a new regulatory framework to facilitate crowd-sourced funding by small unlisted public companies. This form of fundraising was previously difficult to undertake because of the various requirements in relation to prospectuses and other fundraising disclosure documents, the restrictions and prohibitions applicable to proprietary companies and the corporate governance, reporting and disclosure requirements imposed on small public companies.

This legislation replaces the provisions dealing with prospectuses and other fundraising disclosure documents in relation to crowd-sourced funding offers. It sets out eligibility requirements for a company that wishes to make an offer under this new regime and regulates such offers and intermediaries including rules dealing with defective disclosure documents and advertising restrictions. The Corporations Amendment (Crowd-sourced Funding for Proprietary Companies) Bill 2017 proposes to extend the Corporations Amendment (Crowd-sourced Funding) Act 2017 (Cth) to enable eligible proprietary companies to access crowd-sourced funding without requiring them to convert to public companies.

Corporations Amendment (Professional Standards of Financial Advisers) Act 2017 (Cth) aims to raise the education, training and ethical standards of financial advisers who provide personal advice on more complex financial products to retail clients. This was seen as necessary after numerous cases where inappropriate financial advice that proved ruinous was given to a large number of retail clients.

The Treasury Laws Amendment (2017 Enterprise Incentives No 2) Act 2017 made two important reforms. These involved the creation of a safe harbor insolvent trading defence for directors and a new ipso facto regime. The safe harbour defence protects directors from personal liability where they start developing one or more courses of action that are reasonably likely to provide a better outcome for the company than an immediate liquidation or administration. The ipso facto regime prevents a creditor from using the company’s financial position at the time of a scheme of arrangement, administration or receivership to trigger the creditor’s right to enforce the loan. The safe harbour defence and the ipso facto regime are discussed in chapters 13.5 and 24 respectively.

In the Matter of HIH Insurance Ltd [2016] NSWSC 482 (misleading or deceptive conduct in relation to a financial product discussed in Chapter 19).

The Financial System Inquiry Final Report November 2014 (also known as the Murray Report) expressed concerns that training and competence standards of financial services licensees and their representatives were inadequate.

This legislation provides for higher education standards, professional year training and continuing professional development. It also requires compliance with a code of ethics. This is discussed at [19.76]–[19.79].

The Treasury Laws Amendment (2017 Enterprise Incentives No 2) Act 2017 introduced a number of important insolvency law reforms. These include the creation of a safe harbour insolvent trading defence for directors and a new ipso facto regime. The safe harbour defence protects directors from personal liability where they start developing one or more courses of action that are reasonably likely to provide a better outcome for the company than an immediate liquidation or administration. The ipso facto regime prevents a creditor from using the company’s financial position at the time of a scheme of arrangement, administration or managing controllership to trigger the creditor’s right to enforce the loan. The safe harbour defence and the ipso facto regime are discussed in Chapters 13.5, 23 and 24.

The Financial System Inquiry Final Report November 2014 (also known as the Murray Report) expressed concerns that training and competence standards of financial services licensees and their representatives were inadequate.

This legislation provides for higher education standards, professional year training and continuing professional development. It also requires compliance with a code of ethics. This is discussed at [19.76]–[19.79].

The Treasury Laws Amendment (2017 Enterprise Incentives No 2) Act 2017 introduced a number of important insolvency law reforms. These include the creation of a safe harbour insolvent trading defence for directors and a new ipso facto regime. The safe harbour defence protects directors from personal liability where they start developing one or more courses of action that are reasonably likely to provide a better outcome for the company than an immediate liquidation or administration. The ipso facto regime prevents a creditor from using the company’s financial position at the time of a scheme of arrangement, administration or managing controllership to trigger the creditor’s right to enforce the loan. The safe harbour defence and the ipso facto regime are discussed in Chapters 13.5, 23 and 24.